Journal of Economics and Management Volume 17, No. 1 March, 2021

R&D and Cash Holdings in Taiwan and China

Huey-Ling Shiau

Department of Finance, Tunghai University, Taiwan

Wen-Chi Huang

Department of Finance, Tunghai University, Taiwan

Yung-Ho Chang

Department of Finance, Tunghai University, Taiwan

Abstract

We study the link between R&D investment and cash holdings for Taiwan and China. The degree of industry competition is included to explore the variation of cash holdings between R&D and non-R&D firms. Besides, we highlight the effect of financing constraints and life cycles to further investigate such link. The empirical results suggest that Taiwanese firms invest more in R&D than do Chinese firms, and R&D firms hold more cash than do non-R&D firms. Moreover, we find that the degree of industrial competition has a positive effect on cash holdings for only Taiwanese R&D firms, suggesting that cash holdings can be used as a support for industrial competition. Finally, we observe that financing constraints and life cycles do not affect the significance of the degree of industrial competition for R&D investment and cash holdings in these two markets.

Keywords：R&D Investment, Cash Holdings, Financing Constraints, Life Cycles.

JEL Classifications：G30.

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